Mortgages on vessels are a common practice in the maritime/shipping industry and can be an effective way for shipowners to obtain financing for their vessels. Cyprus, as a popular maritime nation, has a well-established legal framework for mortgages on vessels, which provides both lenders and borrowers with a clear set of rules and regulations to follow.
The Legal Framework
The legal framework which governs mortgages on vessels in Cyprus is the Cyprus Merchant Shipping (Registration of Ships, Sales and Mortgages) Law of 1963. Several amendments of this particular law have been made from time to time in order to keep up with the changing needs of the shipping industry and to ensure that the legal framework remains updated.
The procedure for registering a mortgage on a vessel in Cyprus
In accordance with the abovementioned law, a mortgage on a vessel can be created by way of a registered instrument. The mortgage must be registered with the Registrar of Cyprus Ships, and the mortgagee must be a person or entity that is entitled to hold a mortgage under the Cyprus law. The mortgagee must also have the right to enforce the mortgage in Cyprus. If the mortgagee is a Cypriot company and/or entity, the mortgage will also have to be registered with the Registrar of Companies on the first 42 days of its registration.
The mortgage instrument must be in writing and signed by both the mortgagor and the mortgagee. It must also contain certain mandatory provisions, including a description of the vessel, the amount of the mortgage, the interest rate, the repayment terms, and the conditions under which the mortgagee can enforce the mortgage. If the mortgagor defaults on the repayment of the mortgage, the mortgagee can enforce the mortgage in accordance with the provisions of the law. The mortgagee has the right to arrest the vessel, and it can seek a court order to sell the vessel in order to recover the outstanding debt.
In this respect, according to the Deputy Ministry of Shipping (DMS) in Cyprus, the documents required for the registration of a mortgage on a vessel are the following:
- Written Application by a local lawyer together with €30 Advocate stamps.
- Resolutions of Directors on behalf of the Shipowners.
- Duly executed Power of Attorney on behalf of the Shipowners.
- Mortgage and Deed of Covenants (duly executed).
- Certificate of Directors and Secretary (in case of Cyprus registered Company).
- Incumbency Certificate duly executed (in case of foreign registered Company's).
The advantages of registering a mortgage on a vessel in Cyprus
There are of course several advantages to both shipowners and lenders if a mortgage is registered on a vessel under the flag of Cyprus. One of the main advantages is that Cyprus is a well-respected maritime nation, with a long history of maritime trade and shipping. This means that mortgages on vessels in Cyprus are generally viewed as secure investments, which can help to attract lenders and keep interest rates low. Another advantage is that mortgages on vessels in Cyprus are relatively easy to obtain, provided that the borrower meets the necessary requirements. This can be particularly beneficial for small and medium-sized shipowners who may struggle to obtain financing from traditional lenders.
In conclusion, mortgages on vessels in Cyprus provide a secure and reliable way for shipowners to obtain financing for their vessels. The legal framework in Cyprus is well-established and provides both lenders and borrowers with a clear set of rules and regulations to follow. Shipowners and lenders considering mortgages on vessels in Cyprus should consult with a maritime lawyer to ensure that they understand the legal requirements and obligations associated with this type of financing.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.